Based on concerns of a recued competition in the steel manufacturing market in Europe, an in-depth investigation into the proposed formation of a joint venture between Tata Stee of India and Germany’s ThyssenKrupp, has been launched by the European Union earlier in the week.
The venture that would be created by the merger of the steel making business of ThyssenKrupp with that of Tata Steel would create the second largest steel manufacturer in Europe and this is the concern for the EU anti-competition regulators. The two companies had struck a deal in June this year to combat the steady and increasing flow of cheap Chinese steel which has created a price and demand imbalance in the world market.
The two companies are hopeful that the deal which had two years to be achieved, could result in a combined saving of 400-500 million euros ($470-590 million) every year. However this proposed deal is now under the scrutiny of the competition officials in Brussels.
“The European Commission has opened an in-depth investigation to assess the proposed creation of a joint venture by Tata Steel and ThyssenKrupp,” the European Commission, the bloc’s executive arm, said in a statement.
“At this stage, the commission is concerned that the merger may reduce competition in the supply of various high-end steels.”
There could be some issues with competition with respect to the supply of certain specialised types of steel such as some specialised forms of steel that is used in cars, food packaging and engineering products such as electrical transformers, concluded in an initial investigation by the European competition body.
“At this stage, the commission is concerned that, following the transaction, customers would face a reduced choice in suppliers, as well as higher prices,” the commission said.
Various European businesses, ranging from small firms to major corporations are among the customers in this case.
“Industries dependent on steel employ over 30 million people in Europe and we must be able to compete in global markets,” the EU’s competition commissioner Margrethe Vestager said.
“This is why we will carefully investigate the impact of the planned combination of Tata Steel’s and ThyssenKrupp’s steel businesses on effective competition in the steel markets.”
According to the information provided by the two companies, the new merged entity would be called “Thyssenkrupp Tata Steel” and would be headquartered in the Netherlands. It would have a total of over 48,000 employees who would be engaged in 34 production and administrative locations and the new company would produce almost 21 million tonnes of steel every year which is expected to generate revenues of around 15 billion euros.
(Adapted from EconomicTimes.com)